A Medicare Advantage plan — also called Medicare Part C — is an alternative way to receive your Medicare benefits through a private insurance company approved by Medicare. Instead of receiving your healthcare coverage directly through the federal government as with original Medicare you receive it through a private insurer that has contracted with Medicare to provide at least the same benefits as Parts A and B.
Medicare Advantage plans have grown significantly in popularity in recent years and now cover more than half of all Medicare beneficiaries. Understanding how they work, what they offer, and how they differ from original Medicare can help you make a more informed decision about your healthcare coverage.
How Medicare Advantage plans work
When you enroll in a Medicare Advantage plan you are still in Medicare — you still pay your Medicare Part B premium and Medicare still pays the private insurer a fixed monthly amount to cover your care. However instead of Medicare paying directly for your healthcare services your Medicare Advantage plan pays your providers according to its own payment rules and network arrangements.
Medicare Advantage plans must cover everything that original Medicare covers — Parts A and B — but they can also offer additional benefits that original Medicare does not cover. Most Medicare Advantage plans also include prescription drug coverage combining Parts A, B, and D into a single plan.
Types of Medicare Advantage plans
There are several types of Medicare Advantage plans each with different network and coverage arrangements:
- Health Maintenance Organization — HMO — the most common type of Medicare Advantage plan. You must use doctors and hospitals within the plan’s network except in emergencies. You typically need a referral from your primary care physician to see a specialist.
- Preferred Provider Organization — PPO — allows you to see any Medicare-approved provider but you pay less when you use providers in the plan’s network. You generally do not need a referral to see a specialist.
- Private Fee-for-Service — PFFS — pays providers a set rate and you can see any Medicare-approved provider that agrees to the plan’s payment terms. These plans are less common than HMOs and PPOs.
- Special Needs Plan — SNP — designed for people with specific conditions or circumstances such as people with chronic illnesses, people who are dual eligible for Medicare and Medicaid, or people living in institutions. SNPs tailor their benefits and provider networks to meet the specific needs of their target population.
- Health Maintenance Organization Point-of-Service — HMO-POS — similar to an HMO but allows you to use out-of-network providers for certain services usually at a higher cost sharing level.
What Medicare Advantage plans typically cover
In addition to the standard Medicare Part A and Part B benefits most Medicare Advantage plans offer extra benefits that original Medicare does not cover including:
- Prescription drug coverage — Part D
- Routine dental care including cleanings, X-rays, and fillings
- Routine vision care and eyeglasses
- Hearing aids and hearing exams
- Fitness programs and gym memberships
- Transportation to medical appointments
- Over the counter allowances for health-related purchases
- Telehealth services
- Meal delivery after a hospitalization in some plans
The availability and extent of these extra benefits vary significantly between plans and locations.
Cost structure of Medicare Advantage plans
Medicare Advantage plans have a different cost structure than original Medicare:
- Premium — many Medicare Advantage plans have low or even zero dollar premiums in addition to the Medicare Part B premium. However low premiums do not necessarily mean low overall costs.
- Deductible — some plans have annual deductibles while others do not
- Copays and coinsurance — you pay a fixed amount or percentage for covered services
- Out of pocket maximum — Medicare Advantage plans are required to have an annual out of pocket maximum which original Medicare does not have. Once you reach this limit the plan pays 100 percent of covered costs for the rest of the year. This can provide important financial protection for people with significant healthcare needs.
- Network restrictions — using out-of-network providers typically results in higher costs or no coverage depending on the plan type
Medicare Advantage vs original Medicare
Choosing between Medicare Advantage and original Medicare is one of the most important decisions a new Medicare enrollee faces. Key considerations include:
- Provider choice — original Medicare is accepted by virtually all doctors and hospitals nationwide giving you maximum flexibility. Medicare Advantage plans typically require you to use a network of providers which can be limiting especially if you travel frequently or have established relationships with specific doctors.
- Extra benefits — Medicare Advantage plans often include dental, vision, hearing, and other benefits that original Medicare does not cover. Original Medicare beneficiaries must purchase separate coverage for these services.
- Out of pocket costs — Medicare Advantage plans have out of pocket maximums that protect against catastrophic costs. Original Medicare has no out of pocket maximum though Medigap policies can fill this gap.
- Prescription drug coverage — most Medicare Advantage plans include drug coverage. Original Medicare beneficiaries need a separate Part D plan for prescriptions.
- Prior authorization — Medicare Advantage plans may require prior authorization for certain services meaning the plan must approve coverage before you receive care. Original Medicare generally does not require prior authorization.
- Referrals — HMO-type Medicare Advantage plans typically require referrals to see specialists. Original Medicare allows you to see any Medicare-approved specialist without a referral.
When you can enroll in Medicare Advantage
You can enroll in or switch Medicare Advantage plans during several enrollment periods:
- Initial enrollment period — the seven month window around your 65th birthday when you first become eligible for Medicare
- Annual open enrollment period — October 15 through December 7 each year when you can switch between original Medicare and Medicare Advantage or change your Medicare Advantage plan
- Medicare Advantage open enrollment period — January 1 through March 31 each year when you can switch from one Medicare Advantage plan to another or return to original Medicare
- Special enrollment periods — available in certain situations such as moving out of your plan’s service area or losing other coverage
How to compare Medicare Advantage plans
When comparing Medicare Advantage plans consider:
- Which of your current doctors and hospitals are in the plan’s network
- Whether your current prescriptions are covered and at what cost
- The plan’s premium, deductible, copays, and out of pocket maximum
- What extra benefits are included and how valuable they are to you
- The plan’s star rating on Medicare’s Care Compare tool — higher rated plans generally provide better quality care and service
- Whether the plan requires referrals for specialist visits
Medicare’s Plan Finder tool at medicare.gov allows you to compare Medicare Advantage plans available in your area including costs, coverage, and star ratings. The State Health Insurance Assistance Program — SHIP — provides free personalized counseling to help you compare options.
Key terms to know
- Medicare Advantage — a private insurance alternative to original Medicare that must cover at least the same benefits as Parts A and B
- Medicare Part C — another name for Medicare Advantage
- HMO — Health Maintenance Organization, a Medicare Advantage plan type that requires using a provider network
- PPO — Preferred Provider Organization, a Medicare Advantage plan type that allows out of network care at higher cost
- Special Needs Plan — SNP — a Medicare Advantage plan designed for people with specific conditions or circumstances
- Out of pocket maximum — the most you will pay for covered services in a year under a Medicare Advantage plan
- Prior authorization — a requirement that a plan approve certain services before they are provided
- State Health Insurance Assistance Program — SHIP — a federally funded program providing free Medicare counseling
Sources
- Medicare.gov — Medicare Advantage
- Centers for Medicare and Medicaid Services
- State Health Insurance Assistance Program — shiphelp.org
- USA.gov — Medicare
This article is for general informational purposes only and does not constitute legal or financial advice. Medicare Advantage plan availability, benefits, and costs vary by location and are subject to change annually. Consult a licensed insurance professional or contact your state SHIP program for guidance specific to your situation.